G.R. No.

168056 September 1, 2005

ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.

ALCANTARA and ED VINCENT S. ALBANO vs.

THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE

SECRETARY OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and
HONORABLE COMMISSIONER OF INTERNAL REVENUE GUILLERMO
PARAYNO, JR

I. FACTS

The petitioners challenged the constitutionality of Republic Act No. 9337 (VAT Reform Act). They
question the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107
and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10%
VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and
Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned
provisions contain a uniform proviso authorizing the President, upon recommendation of the
Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the
following conditions have been satisfied, to wit:

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous ye3ar exceeds two and four-fifth percent (2 4/5%); or

(ii) National government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1 %).

The following are the arguments raised by the Petitioners:

1. The law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority

to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution;

2. VAT is a tax levied on the sale or exchange of goods and services and cannot be included within
the purview of tariffs under the exemption delegation since this refers to customs duties, tolls or
tribute payable upon merchandise to the government and usually imposed on imported/exported
goods;

3. No guiding standards are made by law as to how the Secretary of Finance will make the
recommendation. The President has powers to cause, influence or create the conditions provided by
law to bring about the conditions precedent. Any recommendation of the Secretary of Finance can
easily be brushed aside by the President since the former is a mere alter ego of the latter.
II. ISSUES

Whether or not there was an undue delegation of legislative power in violation of Article VI Sec 28
Par 1 and 2 of the Constitution.

III. RULING

No. There is no undue delegation of legislative power but only of the discretion as to the execution
of a law. This is constitutionally permissible. Congress does not abdicate its functions or unduly
delegate power when it describes what job must be done, who must do it, and what is the scope of
his authority; in our complex economy that is frequently the only way in which the legislative
process can go forward. The Secretary if Finance becomes the means or tool by which Legislative
policy is determined and implemented, considering that he possesses all the facilities to gather data
and information. In making his recommendation, the Secretary of Finance is not acting as the alter
ego of the President, but as the agent of the Legislative department, to determine and declare the
event upon which its expressed will is to take effect.